South Korea is a hot topic right now, with the 2018 Winter Olympics taking place in Pyeongchang, but something else is also happening in South Korea: strong e-commerce growth.
South Korea is one of the biggest e-commerce markets worldwide, the third largest e-commerce market in Asia, and has the highest e-commerce penetration in the Asia Pacific region. This is thanks to strong technological and mobile adoptions; South Koreans are described as well-educated, informed, and unmatched in their technological abilities.
Over a third of South Koreans spend more than half of their monthly income on online shopping. Between 2012 and 2013, online shopping grew from 9.7% to 10.9% of total retail sales. Cross-border commerce is also growing rapidly; imports from foreign e-commerce websites rose 47% in 2013.
Unless otherwise noted, figures in this article are sourced from:
South Korean Consumers
- Total population: 51.16 million (2018)
- Internet penetration: 92.72% (2016)
- Mobile penetration: 110% (2013)
- Online shoppers: 30.5 million (2017)
- E-commerce sales: $21.38 billion (2017)
- M-commerce sales: $3.08 billion (2016)
- E-commerce annual growth rate: 20.5% (2016)
M-commerce in South Korea is a major driver of the country’s impressive e-commerce growth. M-commerce is booming here, largely due to the fact that South Korea has some of the fastest average internet connection speeds worldwide and a high penetration of smartphones. Between 2011 and 2013, the m-commerce market grew 2.5 times faster than the US, and between 2015 and 2016, purchases made on a mobile phone increased from $22 billion to $31 billion, an increase of 41.8%.
Competition between e-commerce companies in South Korea is increasing and the delivery process is one place where merchants try to stand out. Merchants should offer a quick delivery service to attract and keep South Korean customers who expect fast and trackable deliveries when they shop online. Many South Koreans companies offer same-day deliveries so international merchants must offer better prices to compete. Studies indicate that South Korean customers tend to accept a longer delivery time if it means getting a better price.
The South Korean market is highly penetrated by electronic payments. The most popular payment methods include card payments and alternative payment methods such as money transfers (non-cash payments: wire transfers, electronic fund transfers, online bank transfers), and mobile payments. E-wallet payment methods are not common in the South Korean market.
Major buying holidays in South Korea include Chu-seok (the 15th day of the 8th lunar month), Seollal (Lunar New Year’s Day), Parents’ Day (May 8th) and Children’s Day (May 5th). However, since South Koreans love to shop cross-border, they also follow foreign countries’ buying holidays, such as Black Friday, to find the best deals.
In 2017, fashion was the leading product category in South Korea, followed by Toys, Hobby & DIY. Other popular product categories for online shopping include Online Travel, and Home Electronics & Appliances.
Drivers and Barriers
Driver: Strong Cross-border Commerce Numbers
Cross-border e-commerce is exploding in South Korea, reaching $1.6 billion in 2016. In 2013, cross-border credit card spending grew 15.4% while domestic credit card spending grew only 3.2%. Many consumers here have discovered that products are less expensive overseas. This is because South Korean retailers have agreements with manufacturers that let them charge higher costs for products. This means that consumers have to pay up to nine times higher prices for local products compared to overseas ones!
Barrier: Protection of Privacy
Since 2014, South Korea has been strengthening its rules concerning privacy for personal data. International merchants should review the Personal Information Protection Act (PIPA) and ministerial data privacy/spam regulations before entering this market, as these can restrict e-commerce for companies that manage their user-data on international servers.
South Korea is one of the world’s biggest markets for Bitcoin. In 2017, South Korea was named the world’s third-largest Bitcoin market, after Japan and the US, according to market tracker Coinhills. More than three out of ten salaried workers have invested in cryptocurrencies. In January, it was also reported that the number of cryptocurrency app users in South Korea has increased to around 2 million users. Online merchants here have started to realize the value in offering cryptocurrency payments as a way to make payments more convenient for consumers.
Barrier: Domestic Sales Events
South Koreans who shop online are always looking for the best deals and they expect special sales on holidays. Prices drop and sales volumes increase dramatically during buying holidays such as Chu-seok and Seollal. South Korean consumers also look for deals during non-domestic buying holidays, such as Black Friday and Boxing Day. If you plan to compete with domestic companies, you must be prepared to offer big sales promotions during the South Korean holiday seasons.
South Korean E-Commerce Facts
- The third biggest e-commerce market in Asia.
- Has the highest e-commerce penetration in the Asia Pacific region.
- Over a third of South Koreans spend more than half of their monthly income on online shopping.
- M-commerce is a major driver of the e-commerce growth.
- The most popular payment methods include credit cards, wire transfers, electronic fund transfers, online bank transfers, and mobile payments.
- The biggest buying holidays are Chu-seok (the 15th day of the 8th lunar month),Seollal (Lunar New Year’s Day), and Black Friday (the day after American Thanksgiving).
- The most popular product categories for online shopping are Fashion, Toys, Hobby, DIY, Travels & Reservation Services, and Home Electronics & Appliances.
As the e-commerce market continues to grow in South Korea, the popularity of cross-border commerce continues to grow as well. South Koreans shop at international online stores to find the best deals. If you can undercut the high prices of local merchants, South Korea could be a very profitable market for you.
Expanding into a new cross-border market is always a challenge, but it can be very rewarding if done right. For the latest news and information about how to scale up your e-commerce enterprise into an international success, subscribe to the Payza Blog and follow us on Facebook and Twitter.
E-commerce in Scandinavia is blossoming, reaching a total value of €17.1 billion in 2015, an increase from €15.4 billion in 2014. Scandinavians love to shop online because they can do it whenever they like and online shopping is considered to be cheaper than shopping in physical stores. Consumers also feel they have a better selection when shopping online.
As an e-commerce merchant, Scandinavia is a region you’ll want to get to know.
Cross-border e-commerce in Scandinavia is very popular. Over one-third of online consumers in this region make purchases from international merchants every month. In 2016, purchases from cross-border merchants totaled €5.4 billion euros, 25% of the total e-commerce consumption in the region.
The most popular countries in Scandinavia to purchase from are the UK, Germany, the US, China, and Sweden. The most popular products purchased online are clothing and footwear, followed by media (including books, films, and video games), and home electronics.
If you plan to sell to consumers in Scandinavia, keep in mind that not all Scandinavian countries have adopted the Euro. Only Finland uses the Euro. Swedes, Norwegians, and Danes prefer to shop with their own currency: the Swedish Krona, the Norwegian Krone, and the Danish Krone (which all mean “Crown”).
Unless otherwise noted, figures in this article are sourced from:
- Ecommerce Europe: Sweden, Norway, Denmark, Finland
- Ecommerce News Europe: Sweden, Denmark
- Export.gov: Sweden, Denmark, Finland
Sweden is the third-largest country in the EU by area and the most active e-commerce nation in Scandinavia. E-commerce in Sweden is widespread thanks to a strong Swedish mail order tradition and powerful retail brands. E-commerce accounted for 6% of the country’s total retail sales in 2017. Between 2013 and 2017, e-commerce in Sweden increased by 45%, from almost €8 billion to over €11.5 billion.
Online shopping is very popular in Sweden. Almost three in four Swedish households order something online every year and almost three in ten Swedes order something online at least once a month.
When targeting consumers in Sweden, it is important to know that most Swedes prefer paying by debit or credit card when making a purchase. The second most popular option is to pay by invoice, followed by direct bank payment.
The popularity of m-commerce is growing in Sweden, with more and more consumers using their smartphone or tablet for their online shopping. The number of mobile users increased by 79% in 2016! Payment methods and mobile websites have improved notably during a short period of time, which has helped m-commerce become more popular in Sweden.
It is important to be aware of certain customer protection rules in Sweden if you plan to sell here: online providers must indicate their contact details on their website, clearly identify any advertising, and protect against spam.
Consumers in Sweden
- Total population: 9.98 million (2018)
- Internet users: 92% (2016)
- Online shoppers: 5.8 million (2016)
- Average spending per online shopper: €1,668 (2016)
- E-commerce sales: €9.7 billion (2015)
- E-commerce annual growth rate: 12.0% (2015)
Norway is known as a wealthy country; in 2016, Norway was ranked as the 4th richest in the world per capita.
For international merchants, Norway is an interesting country to focus on. In a 2015 survey of European online shoppers, Norwegians were the most likely to shop on foreign sites, with 46% of the Norwegian population participating in international e-commerce.
Norway is one of the easiest countries to deliver to in the world, an important detail for merchants who want to expand to new markets. When deciding which payment methods to offer to Norwegian consumers, they prefer paying by credit cards, followed by paying by e-wallet, cash on delivery and bank transfer.
M-commerce sales are not as popular in Norway as it is in Sweden. Many people here (83% in 2017) still prefer to shop via desktop instead of via tablet or smartphone.
Consumers in Norway
- Total population: 5.3 million (2018)
- Internet penetration: 87.4% (2017)
- Online shoppers: 3.2 million (2016)
- Average spending per online shopper: €2,467 (2016)
- E-commerce sales: €7.9 billion (2015)
- E-commerce annual growth rate: 1.7% (2015)
The Danish e-commerce market is small but mature. This country is among the world leaders when it comes to digital development and has the highest smartphone penetration in the world (77%). In 2016, Danish e-commerce saw an increase of 15.88% compared to the year before, but the online retail industry in Denmark accounted for only about 10% of the country’s total retail turnover. This number is growing each year though, and cross-border e-commerce in Denmark is also growing as Danish consumers buy more goods and services online.
Danes love to shop online. Not only does this country have a very high number of internet users, but data from Eurostat showed that 79% of all Danish internet users shopped online in 2012. In 2016, an estimated 32% of Danish online shoppers made international purchases. One reason Danes like to shop at foreign e-commerce websites is that they can find better prices than at Danish online stores.
In Denmark, the most popular payment methods are local ones such as Dankort, the national debit card of Denmark (which also functions as a credit card abroad), and MobilePay, a mobile payment solution by Danske Bank. It is important for merchants who want to do business in Denmark to be able to provide local payment options.
M-commerce in Denmark is growing. Owners of smartphones and tablets make online purchases more frequently than other consumers, which is why merchants should make sure they offer mobile-friendly websites for this market.
Consumers in Denmark
- Total population: 5.75 million (2018)
- Internet users: 5.4 million/96.1% (2017)
- Online shoppers: 3.7 million (2016)
- Average spending per online shopper: €3,111 (2016)
- E-commerce sales: €13.84 billion (2016)
- E-commerce annual growth rate: 17.9% (2015)
Finland presents a large e-commerce market but still has some catching up to do. Finland lags behind in e-commerce in comparison to the other Scandinavian countries and Finns shop online less than their neighbors do. In 2015, Finland saw a 9.6% e-commerce growth but there is definitely more room for e-commerce in Finland to grow. Foreign retailers are a very important part of e-commerce in Finland, as Finns rely on foreign retailers for online purchases. Almost 50% of Finnish online shoppers made purchases abroad in 2017.
Internet penetration in Finland keeps growing: there is a steady increase here in internet subscribers, internet users and internet accessibility. The two biggest reasons for Finns to shop online are the greater variety of goods and the lower prices compared to brick and mortar shops.
The most popular payment methods in Finland are debit and credit cards, direct bank payment, invoice, and e-wallets or online payment options. Finns like having a range of different payment options to choose from, but the most important payment methods that merchants should offer are payment cards and direct bank payment.
As with Norway, m-commerce has not really taken off in the Finnish market yet. Mobile websites are still important for online retailers since mobile devices are often used for research and comparing prices, but three out of four online purchases in Finland are made from a computer. Less than 20% of Finns have used a cellphone or a tablet to purchase products. However, trends show that the Finnish m-commerce is increasing, especially among millennials, as trust in mobile payments grows.
On January 1, 2015, a reform of the Finnish regulation on information society took place. This Information Society Code sets regulations on e-privacy, consumer protection, communications networks, and data security. It is important that cross-border merchants are aware of these regulations before entering the Finnish market.
Consumers in Finland
- Total population: 5.54 million (2018)
- Internet penetration: 93.7% (2016)
- Online shoppers: 3.3 million (2016)
- Average spending per online shopper: €2,170 (2016)
- E-commerce sales: €7.2 billion (2015)
- E-commerce annual growth rate: 9.6% (2015)
E-commerce is showing strong growth in Scandinavia and consumers here have demonstrated a willingness to embrace online shopping. Scandinavian consumers love to buy online, especially from cross-border merchants, and the popularity of online and mobile shopping is growing each year. If you’re an international merchant looking to expand your business, this region could offer a profitable market for you.
Expanding into a new cross-border market is always a challenge, but it can be very rewarding if done right. For the latest news and information about how to scale up your e-commerce enterprise into an international success, subscribe to the Payza Blog and follow us on Facebook and Twitter.
Payza is committed to helping online business owners succeed, so we’re sharing 10 hot products for 2018 to help you stay on top of the trends.
If you have an online store or are thinking about starting one, you need a line of products that make you stand out. Get ahead of the game by stocking some of the hippest, trendiest items around.
If you haven’t seen our previous list, there are lots of hot products from 2017 that are sure to be popular in 2018 as well, like VR products and smartwatches. Like last year, we have picked out 10 hot products with strong growing interest according to Google Trends.
Leave your competition in the dust by carrying the products online shoppers will be searching for this year.
Bluetooth headphones are becoming a must-have item, thanks in part to Apple eliminating headphone jacks on their iPhones. It’s been over a year since Apple made the decision to remove the headphones and now other phones, like the Google Pixel 2, are following suit.
Bluetooth headphones aren’t just for mobiles either, they’re also great for late night binge-fests when everyone else in the house is fast asleep.
8-tracks, audio cassettes and CDs have all mostly disappeared as MP3s and digital downloads dominate the music industry, but one form of audio media is actually making a comeback: Vinyl Records. For music lovers that want something physical to hold onto while listening to their favorite tunes, vinyl records are gaining popularity. Whether you offer new releases or vintage collectibles, vinyl albums can make your online store a popular destination for audiophiles.
Most people know these as “Polaroid Cameras,” after Polaroid popularized the concept of cameras that print their own pictures. These cameras largely disappeared over the last decade before making a big comeback. The Fujifilm Instax line of cameras is leading the resurgence with their line of hip devices and fashionable accessories, but there are many different instant cameras available to help you take advantage of this trend.
Funko Pop! Figures
It’s hard to wrap one’s head around just how popular Pop! figures have become over a short period. During the Christmas season, Pop! figures make great stocking stuffers and secret Santa gifts, but Google Trends shows that searches for “Funko Pop” are popular all year round, and growing rapidly.
No matter what fandom you belong to, there’s sure to be a Funko figure for you. Funko has over 175 pages of Pop! figures in their catalog with 15 items per page. That’s over 2500 different figures! Retailers will be happy to know that collecting these characters can become addictive, so much so that an “Addicted Popper” husband recently signed a contract with his wife promising to limit his habit.
E-Bikes and Accessories
The electric bicycle market is primed to hit its stride thanks to many positive factors, according to Persistence Market Research. Increasing awareness, environmental sensitivity, and government support are combining to push e-bikes into the spotlight.
Demand for electric bicycles is expected to be highest in the Asia Pacific excluding the Japan region, as well as India, however North America and Europe are also considered target markets. While e-bikes can sometimes carry a hefty price tag, they remain a practical and economic transportation solution.
Who says scruffy men don’t care about hygiene? Beard oil is making its mark as a must-have grooming product for men with facial hair, and beard oil is just the beginning. If you’re supplying facial hair grooming essentials, there are countless grooming tools and products that would interest any bearded man. Data suggests the beard trend may be peaking, but the market for beard products is just getting warmed up.
Essential oils have many uses and benefits, from relaxation to skin care to cleaning products and more. According to Grand View Research, sales are expected to grow from over 6.0 billion USD in 2015 to 11.67 billion USD by 2022. On top of solid search growth for the Essential Oil topic, searches for “how to use essential oil” are trending up as well, so if you carry these products be sure to help your customers out by providing tips on how they can use them.
When done right, subscription box businesses can be incredibly successful and this model is increasing in demand. People love surprises and love to get exclusive, hard-to-find collectibles for their favorite hobby or fandom. If you know how to stay on top of the trends for your specific niche, curating a subscription box is a great way to show off your skills!
Cryptocurrencies were all over the headlines in 2017 as fear of missing out (FOMO) drove Bitcoin and Altcoin adoption. The craze got so great that several exchanges had to temporarily stop accepting new customers because they had more members than they could handle! As adoption grows, Cryptocurrency Hardware Wallets are sure to be a hot item since it gives users a convenient way to store and protect their coins.
Everybody wants a gift that was made just for them and personalized items let you give exactly that. If you’re an artisan or if you sell your own crafts, giving customers the option to personalize their purchases could help you stand out.
Make Sure You’re Ready to Accept Online Payments
Once you have your line of products set, you’ll need to decide how you want to get paid online. You’ll want a payment processor that gives you options, and of course it needs to be secure and reliable.
A Payza account makes it easy to accept online payments and there are lots of added bonuses like free recurring billing, built-in fraud protection, and no hidden fees. With Payza, you can process credit card, Bitcoin and e-wallet payments from customers all around the world. Set up your Payza Business Account to get started.
Germany is Europe’s largest economy and the most populous and largest country in the EU. It is also the third most active e-commerce country in the world, both for imports and exports, after the US and the UK. The German e-commerce market is strong worldwide and accounts for 25% of the European e-commerce turnover.
Germany had a total turnover of €105.6 billion in 2016, an increase of 10% from 2015. This is a lucrative country to do business in, especially online, as Germany ranks 5th in the world for online sales volume. German consumers have a big interest in online shopping, in fact, Germany shows the second highest interest in the search term “shop online” according to Google Trends.
Unless otherwise noted, figures in this article are sourced from:
- Total population: 82.11 million (2017)
- Internet penetration: 71.1 million or 86.8% (2013)
- Mobile penetration: 139.9% (2013)
- Online shoppers: 51.6 million (2015)
- E-commerce sales: 59.7 billion EUR (2015)
- M-commerce sales: 4.97 billion (2013)
- E-commerce annual growth rate: 13.3% (2015)
Germany is the most populous country in the EU and over 62% of Germans shop online. 90% of all internet users buy their goods or services online and spend on average €1,157 per year. The biggest online shopping day in Germany is “Green Monday,” the first Monday in December. This day works as an online shopping promotional event before Christmas.
Credit card usage is uncharacteristically low in Germany, making bank transfers and invoices the most popular payment methods. A survey from 2013 showed that six in ten online shoppers prefer to pay after receiving the items they’ve ordered online. Other popular payment methods in Germany are online payment services and e-wallets.
The top product categories in Germany for 2016 retail e-commerce sales were Clothing (an increase of 11.5% in sales from a year earlier) and Consumer Electronics & Telecom. Other popular categories include Shoes & Lifestyle and Information Technology.
German businesses are also turning more towards online shopping for their B2B needs; 83% of the companies surveyed in a 2015 study stated that they frequently made company purchases online, such as for office supplies and other business needs.
Drivers and Barriers
Driver: Cross-border Commerce
Germany is one of the world leaders in cross-border e-commerce and German online shoppers love to buy cross-border, mostly from the UK, the US, France and China. The cross-border e-commerce penetration among German digital buyers is on the rise. In 2015, 53% of German internet users made an international purchase, which is more than shoppers in most other European countries. Furthermore, Germany is responsible for 15% of global cross-border sales.
The German e-commerce market totaled €59.7 billion in 2015 and grew about 12% to €66.9 billion in 2016, according to a report by Bundesverband E-Commerce und Versandhandel (bevh). This market is one of the most active ones in the world and is growing faster than any other Western European Country.
Barrier: Aversion to Credit Cards
Many Germans are wary of using credit cards because of a fear of carrying debt. In 2015, the level of card payments was at just 12%, a number that is expected to fall to 8% by 2019! Also, only 25% of German shoppers use credit cards when they make an online purchase.
Merchants who wish to sell to German online shoppers need to offer alternative payment options beyond credit cards. Popular alternatives to credit cards would be paying via bank transfers, invoices and e-wallets.
Mobile commerce is gaining popularity in Germany and a big proportion (62%) of the German population own smartphones. In 2013, 10% of all online sales were made via a mobile device and in 2014, it was reported that 15% of German consumers made a monthly purchase on their smartphones. In 2016, retail m-commerce sales made up 33.2% of Germany’s total retail e-commerce sales.
Merchants wanting to do business in Germany should focus on offering mobile-friendly websites and provide convenient ways to shop using a mobile device (such as apps), as this will surely result in profits for the business. By optimizing for mobile payments, merchants can attract more German consumers.
Barrier: Strict Data Protection & High Return Rates
In Germany and the EU, data protection and privacy laws are very strict. The European Union “Electronic Commerce Directive (2000/31/EC)” provides rules for online services in the EU, which the German regulatory environment follows. Among other things, online providers must respect consumer protection rules by indicating contact details on their website, clearly identifying advertising, and protecting visitors against spam. Consumers must also be informed when businesses are collecting data, what the data will be used for, and who will have access to it. They must also be given sufficient time to object to how their personal information will be processed. Companies are advised to consult with a lawyer before collecting, storing or processing any kind of data in Germany.
Germany is also known for having a high return rate and many German consumers are hesitant to shopping abroad because they feel that returning products would be too difficult or costly. There are reports claiming that 50% of all orders by German consumers get sent back! This is very important for merchants to be aware of and when shipping internationally to Germany, it’s important to offer the same returns policy as the one in place for the business’ native country and it could be good to have a local return address.
German E-Commerce Facts
- The third most active e-commerce market, after the UK and the US.
- A world leader in cross-border e-commerce.
- Accounts for 25% of the European e-commerce turnover.
- Most popular payment methods are invoices, bank transfers, and e-wallets.
- Green Monday (the first Monday in December) is the biggest online shopping day of the year.
- Ranks 5th in the world for online sales volume.
- 51.6 million of the population shops online and 90% of all internet users buy their goods or services online.
- Retail m-commerce made up 33.2% of Germany’s retail e-commerce sales in 2016.
- The most popular product categories for retail e-commerce sales include Clothing, Consumer Electronics & Telecom, Shoes & Lifestyle, and Information Technology.
German consumers love to buy cross-border, making Germany a fruitful market for international merchants. Online and mobile shopping are gaining popularity as well, both among personal shoppers and German businesses, so whether you sell to individuals or businesses, Germany is a lucrative market for you.
Expanding into a new cross-border market is always a challenge but can be rewarding if done right. For the latest news and information about how to scale up your e-commerce enterprise into an international success, subscribe to the Payza Blog and follow us on Facebook and Twitter.
2017 was an exciting year for Payza. We launched dozens of new products and features, gained millions of new members, and introduced a range of cryptocurrency services that are safe, secure, and easy to use.
As 2017 makes way for 2018, we’re taking a look back at some of our most memorable blog posts and updates:
Buy and Sell Altcoins
New to Payza this year is that you can now instantly buy and sell a wide variety of altcoins. Read more about these exciting new options and learn all about how they work.
- Read: Buy Altcoins with Payza: Introducing Altcoin Withdrawals
- Read: Exchange Ethereum, Ripple, Litecoin and More: Sell Altcoins to Payza
Payza Adds New Bitcoin Services
Payza now lets you do even more with Bitcoin. You can buy and sell Bitcoin, hold Bitcoin in your Payza e-wallet, and convert Bitcoin to and from over 20 traditional currencies that Payza supports. Learn how to use Payza’s wide range of Bitcoin services.
Exchanging Cryptocurrencies into Cash
The Payza Blog brings you news and advice on a wide range of financial services. Earlier this year, we looked at the different ways to exchange your cryptocurrencies into cash, quickly and safely.
It’s not enough for Payza to bring our members safe and easy ways to buy cryptocurrencies, we want you to be well informed about the different cryptocurrencies and understand what makes them unique as well. With that in mind, we published our first two cryptocurrency profiles: Dash and Ethereum.
Stay tuned for more Cryptocurrency Profiles in 2018!
New Checkout Module
If you’re an online merchant, you’ll love the new Payza checkout experience! We’ve streamlined the experience for both Payza members and guests alike. Your customers can pay by credit card, Bitcoin, or e-wallet, with just a couple of steps to complete each option. Read all about the new checkout flow and find out how it will help you improve your checkout conversion rate.
Country and Region Spotlights
As a Payza merchant, it’s just as easy for you to process international payments as it is to process payments from your home country. To help you reach new markets, Payza offers country and region spotlights that are packed with statistics and insights about markets that are ready to explode. Get a leg up on the competition by reviewing these profiles.
- Read: Country Spotlight: Understanding Consumers and Cross-Border E-Commerce in Bangladesh
- Read: Regional Spotlight: Consumers and E-commerce in Southeast Asia
- Read: Country Spotlight: Brexit’s Impact on Cross-Border E-Commerce in the UK
- Read: Regional Spotlight: Consumers and E-Commerce in Latin America
Payza Tips and Updates
Our members love the Payza Card. The Payza Card is a great companion for your Payza e-wallet that gives you more freedom with your Payza funds. This year on the Payza Blog, we explained everything you need to know about the Payza Card. Learn how to order your own card, how to load it with funds, and how to use it.
Payza App Updates
There’s a new update available for the Payza App on both Android and iOS that brings all of Payza’s Bitcoin services to the app. Find out what else is new by reading our latest Payza App update blog post.
Earn Money with Payza
Payza Referral Program
The Payza Referral Program is a great way to earn some extra money while letting your network know about Payza. Earn $5 for your first 10 referrals and $10 for each one after that! Find out all the details and requirements of the Payza Referral Program and start taking advantage!
Payza ISO Program
You can think of an ISO program like a referral program for businesses. If you are an independent sales representative or sales organization, you can help Payza onboard new businesses and earn lucrative commissions in the process. Find out all about it on our blog.
Thank you to our many new and returning blog readers! We saw lots of activity and engagement on our many blog posts this year! We love knowing that the Payza Blog is a helpful resource to our millions of members around the world.
After an extended period of instability, Egypt’s economy is beginning to strengthen once again. This is due in part to a series of bold economic reforms on the part of the Egyptian government, including measures to induce investment and spur private-sector job creation, the introduction of a value-added tax (VAT), and a reform of fuel subsidies. These reforms have inspired praise from the International Monetary Fund (IMF) and has helped earn the country a $12bn loan.
Any large influx of money into a market is bound to catch the eye of investors, and rightly so! The loan and the economic reforms have improved Egypt’s public finances and strengthened social programs, stabilizing the economy. This in turn puts more disposable income into the pockets of Egyptian consumers.
With money to spend and the recession now firmly in the rear-view mirror, today’s consumers in Egypt are turning to e-commerce to get their shopping fix. If you are an e-commerce merchant looking to expand your reach to Egypt, here are some important points to consider:
Unless otherwise noted, figures in this article are sourced from:
- Total population: 92 million
- Internet users: 48 million
- Online shoppers: 8 million
- E-commerce sales: $5 billion USD
- E-commerce annual growth: 22%
As with any newly-affluent demographic, Egypt’s growth potential is great and, for now, the consumer demand for e-commerce merchandise is far greater than the supply. However, Souq.com, the biggest domestic player and the largest online shopping portal in the Middle East and North Africa region (MENA), was purchased by Amazon early this year. Around the same time, Souq’s biggest competitor Jumia also invested $20 million into Egypt. The success of Jumia and other new online sellers in recent years proves that the Egyptian market is still hungry for more e-commerce options.
Egypt is home to the highest number of internet users of any MENA country, with more than half of the country’s population online. However, the proportion of the online population that participates in e-commerce remains extremely low, with only 1 out of 6 people using the internet to shop. That number is expected to rise rapidly though, as the wealth of the nation grows.
Currently, most online sales to Egyptian consumers fall under the categories of electronics, entertainment, airline tickets, and fashion.
Drivers and Barriers
Driver: Rapid Economic Recovery
The political and economic turmoil of recent years has prevented Egypt from fully modernizing its economy and its e-commerce sector in particular. As we’ve seen in many other countries, such as Spain and Ukraine, this state of affairs is almost always followed by a massive explosion of growth in infrastructure, internet connectivity and e-commerce penetration. The investments being made by the local government and the IMF have created a period where the demand for e-commerce options far outstrips the supply, so it is an ideal time for retailers to find their audience.
Barrier: Cash Dependency
Payment card penetration is low in Egypt, with only around 10 million credit or debit card holders in the country, representing a little more than 10% of the population. That number is slightly higher if we look solely at Egypt’s online population, but roughly 80% of e-commerce purchases are still paid for by cash-on-delivery. Credit card issuance is growing by 40% yearly, so cash dependency will decrease over time, but it is very beneficial to offer alternative payment options when selling to Egyptian customers.
Driver: Localized Services
Prior to Amazon’s $580 million purchase of Souq.com, the American e-commerce platform had spent years competing with the Egyptian company throughout MENA, failing to oust the incumbent platform due to poor or nonexistent language and currency support. Consumers in Egypt place a great value on localized services, so retailers who offer Arabic-language websites and support the Egyptian pound currency (EGP) have a competitive advantage over other cross-border sellers.
Barrier: Market Control
Key among the government initiatives to stabilize the Egyptian economy was the introduction of a VAT rate, which currently stands at 14%, along with restrictions on foreign investments in several sectors of the economy. Though designed to create the conditions which allow business and innovation to flourish, these controls also give domestic businesses a competitive advantage over cross-border retailers.
Egyptian E-Commerce Facts
- Largest online population in the MENA region.
- Egyptian consumers spent an average of $641 USD online in 2015.
- The demographic that spends the most online is urban, well-educated people aged 26-35.
- The most popular payment method is cash-on-delivery.
- The most popular product categories for online shoppers are electronics, entertainment, airline tickets, and fashion.
- According to Payfort’s State of Payments in the Arab World, Egypt’s e-commerce market is expected to reach a value of $2.7bn by 2020, a growth of 100% over 5 years.
Despite Egypt’s ongoing concerns, the country’s growth potential is unmatched in the region. Egyptian consumers are hungry for independent retailers, with numerous underserved market segments and little access to cross-border merchandise. The challenge with the Egyptian market is that after so many years of economic instability, it’s hard to quantify the market’s risk factor. At the same time, that’s also what makes the potential reward so great. E-commerce businesses have the opportunity to gain significant traction in a rapidly maturing market by expanding their reach into Egypt.
Expanding into a new cross-border market is always a challenge but can be very rewarding if done right. For the latest news and information about how to scale up your e-commerce enterprise into an international success, subscribe to the Payza Blog and follow us on Facebook and Twitter.
Payza continues to gain international recognition, earning its third major award of 2017.
Mumbai, Maharashtra, India, December 4, 2017 – Payza was recognized as the best international payment processor at the 2017 Super Achievers Awards in Mumbai, India. The award is a third major win for Payza this year at international events, along with wins at the MPE Awards in Berlin, Germany, and the CNP Awards in Orlando, USA.
Payza is the first online payment platform in India capable of Inward, Outward, Domestic payments and Remittances with full support of exchanges. Payza members in India can instantly send and receive money, to and from over 190 countries worldwide. Members can use their desktops or mobile app to send & receive money using Payza’s easy and secure services.
Payza’s win at the 2017 Super Achievers Awards comes the same month as the company was nominated for Startup of the Year at the India FinTech Awards. The company was represented at both events by Payza India Director, Vineet Tewari.
“It is because of the contributions of every Payza India employee that we achieved this level of recognition. I am very proud of our team for all that we have accomplished,” said Vineet Tewari.
“Payza has many more exciting plans for India and the world, we hope to keep building on our success this year,” added Tewari. “Stay tuned for another brand-new product release: Outward Remittances. Absolutely hassle-free, seamless and completely online, a send money option across the Globe, available at one single click, one single platform, at the comfort of your home.”
Payza is an award-winning online payment processor. The highly secure platform provides businesses around the world practical solutions for processing online payments and disbursing payouts and remittances, both in traditional currencies and Bitcoin. Payza supports 26 currencies and serves over 14 million Business and Personal members in more than 190 countries.
Payza offers a wide range of built-in tools including: Online payment processing, online global money transfers, fraud screening, subscription billing, transaction dispute resolution, cryptocurrency exchange services, global payouts, and much more. Payza accounts can be managed through the desktop website or using the Payza App for Android and iOS.
Alternative Payment Methods, or simply Alternative Payments, are payment options that don’t require a traditional payment device, such as a credit card. The term most often applies to online payments but can be used for brick and mortar payments as well.
Many alternative payment options are now gaining ground on credit cards, becoming more popular every year. Here are five of the most popular alternative payment methods today:
An e-wallet, or digital wallet, is a secure place to store funds for payments and money transfers. E-wallets are particularly helpful for industries that have difficulty obtaining credit card processing or businesses that need to both send and receive online payments.
E-wallet payments recently surpassed debit cards in 2017 as the second most popular payment option. They have their sights set on credit card payments next; the 2017 Global Payments Report by Worldpay states that e-wallets will overtake credit cards in the United States within five years and will account for 45.9% of the payments market by 2021.
One benefit of e-wallets is that they can be funded in many different ways: by bank account, credit card, prepaid card and more, depending on the platform. Several of these funding options are instant, so customers can load it beforehand, or wait until they’re ready to make a payment or send money to another account.
The biggest advantage that e-wallets have over credit cards is that they can provide a fast and streamlined checkout experience. All payment information is stored within the e-wallet, so in most cases a consumer simply has to authorize the purchase to complete the checkout. There’s no need to fill out long credit card forms.
Examples: Payza, PayPal, Alipay.
This alternative payments method turns your phone into a payment device. Mobile payments can vary slightly by device and region, but all forms require a phone or mobile device.
Statista reports that the worldwide mobile payment revenue in 2015 was 450 billion USD and is expected to surpass 1 trillion USD in 2019; the global mobile payment revenue is increasing rapidly. In the US, mobile payments continue to gain popularity. The 2017 Global Mobile Consumer Survey: US Edition by Deloitte states that 29% of consumers surveyed had made an in-store mobile payment. There has also been a 50% increase in consumers who now use mobile payments on a weekly basis.
Mobile payments are also catching on in Europe: there was a record breaking increase of 200% from 2015 to 2016 of people making mobile payments. According to Statista, the transaction value of mobile payments in Sweden is expected to grow by a rate of 66.4% annually over the next five years, from $1,100m in 2017 to $8,425m (USD) in 2021.
There are different ways to pay using mobile money, either in the real-world or online. For some payments, you can simply “tap” your phone to the payment reader, for others you would use an online portal. Some mobile money systems don’t even require a smartphone at all, but allow you to send money through a feature phone.
Analog mobile payment systems are popular in developing countries because they bypass the need for bank accounts, credit cards, and smartphones. In developed regions with high internet and smartphone penetration, mobile money is more commonly sent online. In both cases, this payment method tends to be best suited for domestic transfers and are not as convenient for international transactions.
Examples: M-Pesa (Kenya), bKash (Bangladesh), Swish (Sweden), Venmo (USA), Apple Pay, Android Pay.
While many card payments are made by credit card, there are other types of cards that can be used as well for online and real-world purchases: debit cards, prepaid cards, and charge cards. These card types help to limit overspending by either using existing funds or not allowing you to carry debt from month to month.
This table offers a quick summary of the differences between credit cards and alternative cards:
|Credit cards||Debit cards||Prepaid cards||Charge cards|
|Safer than cash||x||x||x||x|
|Linked to a bank account||x|
|Billed for later payment||x||x|
|No spending limit||x|
Debit cards can be swiped at retailers or used online to purchase goods and services, like a credit card. However, with direct debit cards the money is drawn from your bank account right away when you make a purchase.
Prepaid cards are pay-as-you-go cards, because you load them with cash when buying them and top them up when they run out. The prepaid card company keeps a record of your card and will be able to block and replace it if it’s lost or stolen, making this a safe payment method.
When using a charge card, you must pay the bill in full every month by the due date, which can help control spending. For your purchases to be approved, your spending and payment history is taken into account, as well as your financial resources and credit record. Charge cards can be used to build a credit history without risking getting into expensive debt, as long as you pay the full balance each month.
Examples of prepaid cards: Paysafecard, Vanilla Card.
Examples of charge cards: American Express, Diners Club International.
Cryptocurrencies, also called digital money, are secure digital records that cannot be forged, duplicated, or altered. In most cases, transactions that have been completed and confirmed by the network are irreversible, making this payment option very attractive for merchants who are worried about credit card chargebacks.
Cryptocurrencies were conceived to be decentralized digital cash systems. This means that no central body such as governments or banks have control over them and they are resistant to censorship. Bitcoin was the first cryptocurrency, but there are now hundreds of other alternatives: Altcoins. Luckily, many of these cryptocurrencies can be described in four words or less.
Cryptocurrencies are generally linked to a Blockchain, which acts as a ledger that records all movement of the digital currency. The ledger is publicly accessible and is verified by multiple independent members of the community. The cryptocurrency is thereby decentralized and no single entity has full control over the coin.
This graphic from Blockgeeks explains how a basic blockchain works:
Cryptocurrencies are still very new; Bitcoin is less than 10 years old, so merchants are understandably skeptical about adopting it. However, early movers such as overstock.com and Expedia were able to attract new customers and garner media attention by adopting cryptocurrency payment options.
Examples: Bitcoin, Ethereum, Ripple, Litecoin.
Bank account payments let you send money directly from bank account to bank account. This can be an attractive option for merchants as bank payments in general have a lower cost for payment acceptance than credit cards.
There are two ways to accept bank account payments: customers either make payments directly to your bank account or they can use an online banking system to complete the payment.
There are three types of bank account payment methods, each one has their own advantages and drawbacks.
Bank transfers are forecast to become the second most popular payment method globally by 2021, according to the 2017 Global Payments Report by Worldpay. This option has low fees, making it a favorite among merchants and consumers. iDeal (Netherlands) and Giropay (Germany) are examples of online banking systems for bank transfers.
Bank wires transfer money via either a bank or non-bank provider, such as Western Union. The bank requests for the transaction to be completed by transmitting a message via a secure system (such as SWIFT) to the receiving bank. This option is extremely secure but usually has high fees, making it a better choice for large payments.
With direct debits, funds aren’t transferred right away. Instead you authorize the merchant to collect the money from your account at a set time, then the money is deducted from your account automatically. This is a simple and handy way to pay monthly and recurring bills as you only need to authorize the payment once. SEPA Direct Debit (Europe-wide) and ACH Debit (USA) are examples of online banking systems for direct debit.
|Bank Transfers||Bank Wire||Direct Debit|
|Manual direct payments||x||x|
|Good for subscriptions||x|
Alternative payments offer many benefits for both merchants and consumers. By understanding your customers and their payment needs, you can offer the right alternatives that will help take your business to the next level. To get started with alternative payment methods, be sure to sign up for your free Payza personal or business account today!
Alternative Payment Methods, or simply Alternative Payments, are payment options that don’t include traditional credit cards, especially for online purchases. There is a growing list of alternative payment methods, each with its own unique application. Most of these are either connected to a specific country or region, or have been designed to facilitate online transactions.
It’s not easy to find a single definition for alternative payments, but most experts agree that any payment method where you aren’t required to enter your credit card number at check-out would qualify as an alternative payment. An alternative payments system would therefore be any payment system that doesn’t require any credit card association for a transaction.
Alternative payment methods can increase a merchant’s global reach, provide customers with more choices, help to simplify checkout from both desktop and mobile devices, and potentially save merchants money by lowering processing fees and fraud risks. Whether you’re an online shopping enthusiast or manage an e-commerce business, it’s a good idea to familiarize yourself with the wide range of alternative payment options available to you.
Some of the most common alternative payment methods are:
- Mobile payments
- Bank transfers
- Prepaid cards
- Direct debit
By offering some or all of these alternative payment methods, your business will stand out by meeting the various customer demands and individual preferred means of payment.
Alternative payment methods present benefits for both merchants and consumers:
Benefits for Merchants
Online shoppers worldwide have diverse payment method preferences, so it’s necessary for merchants to offer a range of payment options, which will in turn attract more customers.
Alternative payment methods are valuable for merchants as:
- They can enter markets with low credit card coverage.
- They can accept more than credit cards.
- They get a lower risk of returns & avoid loss of sales due to credit card declines.
- It presents a real-time online payment acceptance.
- It’s a trusted buying process.
- It increases sales, both domestic and international.
- It presents a real-time online payment acceptance.
- They can provide payment options familiar to the consumer.
Avoid Loss of Sale Due to Credit Card Declines
When credit card payments are declined, there’s not a lot that business owners can do if that’s the only payment method that they accept. One of the most important measures of success for a merchant is the conversion rate: your revenues get higher the more your customers complete the checkout. Credit card declines can impact this as customers whose credit card gets declined may be discouraged to complete the checkout.
Credit card declines are a big problem, for the merchant, the consumer, and the credit card issuer. In 2014, a survey revealed that 17% of consumers interviewed had experienced a credit card decline in the United States, and this number is only increasing.
According to the Baymard Institute, credit card declines kill 2-5% of all potential sales. 90-95% of transactions are accepted on the first try, leaving 5-10% of consumers to try to complete their transaction a second or a third time before it’s approved. Typically, half of these transactions will then succeed, which still leaves 2-5% of e-commerce sales lost due to credit card declines.
To avoid a loss of sale due to credit card declines, merchants need to consider offering an alternative to card payments. By offering alternative payment methods, merchants give their customers greater flexibility which can be an excellent motivator in a purchase.
Increase Sales & Engagement
Alternative payments have been shown to drive traffic and increase sales, as well as “reduce shopping cart abandonment, support customer acquisition and help marketers overcome other key challenges.” Research from Blackhawk Network in 2017 has revealed that alternative payment methods can:
- Increase the likelihood of customer purchases and recommendations: 77% of the surveyed consumers would likely recommend a retailer that offers an alternative payment method, and 78% also believe that alternative payment options makes it more likely for them to make a purchase.
- Foster loyalty: 67% of the respondents believe that using an alternative payment method keeps them loyal to the brand or retailer.
- Drive shopper traffic and affinity: 37% of the respondents are more likely to visit a website or store that accepts alternative payment forms.
- Prevent cart abandonment online: 11% of the respondents said that a mobile payment option would motivate them to complete an online purchase.
This means that merchants are not simply adding value and convenience for their existing customers by offering alternative payment methods, but these options will also help them attract new customers while generating greater loyalty and engagement from existing customers. Alternative payments can for that reason be seen as a great engagement tool for merchants.
Providing many payment options would also increase a business’ conversion rates, as it’s more likely that a customer will complete a purchase and come back in the future if there are more payment options to choose from. This is not something new: in 2009, research showed that 50% of surveyed British adult online shoppers said they would not complete a purchase if their preferred payment method was not available. The same survey showed that 40% of these shoppers would be more comfortable purchasing from an online business that offers many different payment methods. So merchants who want to make shopping at their store simpler and more attractive can actually increase profits by offering alternative payment methods.
Increase Cross-border Sales
Many countries have populations that want goods from outside their borders (“growing internet penetration and young populations accelerate this trend”), and “banks and traditional payments take time to get established in these new markets.” Alternative payment methods that can accept payments from across boundaries provide easier e-commerce worldwide for a business that is not limited by geography. So an online business can gain popularity in a country and connect to its consumers if it can offer payment options that are familiar to the consumers.
Alternative payment methods would also reduce the risk of chargebacks as many alternative payment methods do not allow for chargebacks (the forced return of funds to their original source). This means that merchants can feel more secure when they accept a Bitcoin or money order payment over a credit card payment for example, since they know that the payment cannot be refunded without their permission. If you want to reduce your chargebacks, you should consider alternative payment methods.
It’s not just merchants who benefit from alternative payments, there are big benefits for online shoppers as well.
Benefits for Consumers
Today, it’s important that consumers feel that they have a choice when doing a payment, so that they are not “forced” to pay in a single way (for example by credit card). When doing an online purchase, it is much more convenient for a consumer if they can choose a payment method that they are familiar and comfortable with, which is why alternative payment methods would also be beneficial for consumers.
Alternative payment methods are attractive to consumers because:
- They offer locally preferred payment methods.
- They provide language and currency localisation.
- They are recognized as trusted payment methods.
- No credit or debit card is needed.
- They are convenient, reliable, simple and secure.
- They get access to more products and services.
- They help simplify the shopping experience.
Local & Trusted Payment Systems
While alternative payment methods are not always country specific, it is important to recognize that there are different preferred payment methods for populations in different countries. Specific local payment systems are very attractive to the consumers, as they can use the payment system that works best in their country and this facilitates their online transactions.
Payment methods that offer instructions in a consumer’s own language and uses local currency will also put consumer at ease and make them feel more comfortable when completing checkout. This will help lower abandonment rates and increase customer satisfaction, giving you a big advantage over the competition.
As a shopper, it is generally safer and more secure to use an alternative payment method than a credit card for online payments. Online fraud is a major concern but alternative payment options tend to have a much lower fraud risk than credit cards. Customers that are concerned about online security and would prefer not using a credit card can opt instead for a reliable alternative like an e-wallet or cryptocurrency, which would be a safer and more secure option.
Most alternative payment methods don’t require consumers to fill in as many online forms as a credit card purchase requires. This simplifies the online shopping experience and allows users to make their purchases faster. With an e-wallet, customers only have to enter their email address, and their billing and shipping information would be pulled from their e-wallet account. Customers will come to appreciate the rapid checkout experience, which could translate into more repeat business for your e-commerce website.
The popularity of alternative payment methods is growing, so as a merchant you might want to look into which alternative payment method(s) would work best for your online business.
With the Payza e-wallet, you can send and receive money online instantly, using credit and debit cards, bank transfers, bank wires, cryptocurrencies and so much more. Sign up for your free personal or business account today and discover all the alternative payment options offered by Payza!
Ah, bulk discounts. The wonderful phenomenon responsible for $20 bags of trail mix that are so big they last for months in your cupboard or for keeping the checkout lines at Costco full of people with even fuller shopping carts.
For consumers, buying in bulk presents a clear opportunity for serious savings without necessarily sacrificing quality: all it requires is a little bit of foresight and a lot of storage space. For retailers, however, the benefits are arguably even more appealing. Bulk selling means more overall volume (and therefore revenue), but it also passes down some of the cost of holding inventory to the consumer, reduces the cost of customer acquisition, and presents an easily marketable value proposition.
It’s no surprise then to see e-tailers build on this principle and adapt it to their specific market. To compete with giants like Walmart, Amazon, and Alibaba, many smaller players (some of them not so small anymore) have been relying on a bit of creativity to enhance the consumer experience.
Three specific bulk-sales business models have attracted our attention: subscription-based, group couponing, and crowd purchasing sites. Each of these models comes with their own pros and cons.
From a business perspective, it’s evident why encouraging customers to purchase a subscription box is advantageous. You won’t need to forecast who will buy what this month or how much you’ll need to order, it helps keep storage cost down, and a new customer who signs up is almost guaranteed to be more valuable on average than if you were to offer a one-time purchase. If the quality of the selection is perceived to be high, subscribers also tend to be vocal about their contentment, with many influencers providing a large portion of the traffic directed towards subscription sites. This goes hand-in-hand with the unboxing phenomenon, which encourages subscription box businesses to invest in branding and packaging, along with selecting other brands to feature in their selection who do the same.
As of April 2017, the largest industry sector is beauty, followed by food and apparel. Beauty itself captures over 35% of the subscription-based online market, with two of the three largest companies fitting in this sector (Ipsy, Dollar Shave Club). Why is beauty dominant? A plethora of factors can be proposed:
- Beauty products tend to have a high emotional value to customers, which makes the experience of the purchase as important as the product itself.
- There is a risk factor associated with the use of new products, which increases the appeal of curation and the endorsement of authority figured (influencers).
- By default, subscription-based models favor the creation of a niche: sites are largely gender-centric to narrow down interest and simplify marketing efforts.
- The use of beauty products, just like the other dominant segments (food/cooking, apparel, and pet care), is part of a routine – a perfect fit for businesses based on repeat purchases.
Standing in second place, the food segment seems more uncertain as leader Blue Apron is struggling to keep investors happy and maintain subscriber numbers. While CFO Brad Dickerson is blaming marketing cutbacks put in place to automate their warehouses, other players like Goodfood are moving. Goodfood is planning to become a Canadian equivalent to Blue Apron and even surpass it. In the meantime, Amazon wants to do what Amazon does best: use its titanic influence and deep pockets (see the recent Whole Foods acquisition) to completely dominate the market.
The appeal of subscription doesn’t stop at consumables though. The apparel industry is slowly gaining grounds as shopaholics are considering adding an element of adventure to their e-commerce experience. Big player Stitch Fix is looking to secure founding through an upcoming IPO in the United States. FabFitFun is pooling multiple different sectors by offering a box satisfying your “beauty, wellness, fitness and fashion” needs, taking the curation aspect to a new level. A smaller competitor, the Wrist Society, aims to change the way consumers look at watches by having them try a myriad of different ones and educating them. Each timepiece is paired to a type of event or situation. Others are focusing on their local market, like Montreal-based From Rachel that sends pre-selected tights based on an online profile.
Group Couponing Model
Groupon is very well-known and one of the first online couponing websites to really make an impact. This website, who quickly became a behemoth (to the point of receiving, and rejecting, a $5.75B bid from Google), has largely faded from the news but not from the minds of business owners and consumers who keep using its services. Despite a near -$200M net income loss in 2016 and a stock with a poor performance, Groupon still has had over 48M unique users making a purchase in the past 12 months.
The second biggest competitor in the group couponing industry, LivingSocial, proposes a very similar model and user experience, but is limited to the United States.
The relationship between local businesses and group couponing sites is fairly simple: businesses get free online exposure without having to pay upfront for a web marketing campaign, but they lose a large part of their profit margin by providing significant discounts. In exchange, Groupon gets a cut for each deal purchased. This approach is somewhat different from retail couponing sites like RetailMeNot and DontPayFull, who are less service-oriented and focus on discount codes redeemed in online carts.
Finally, there’s crowd purchasing. At the moment, this is the most novel segment, with only one notable player: Massdrop. On this site, patience is a virtue (shipping tends to be longer than for regular e-tailers) and the selection is limited, but shoppers are rewarded with high-quality items found at exclusive prices.
Here, the business adopts a more collaborative rather than transactional approach, with both the brands it carries and its consumers. Items are requested by users, who create polls to gauge enthusiasm, then Massdrop contacts the sellers to negotiate an arrangement. These deals go from developing a new joint product to simply listing existing ones on the Massdrop site. The goods are then sold in the form of “drops” – organized discount purchases that are only valid if a certain amount of people commit to buying them. As such, drops can ‘fail,’ as insufficient volume wouldn’t allow for the promised discount.
Is such a business model viable? Sure, it requires partnerships and relies on keeping niche communities alive and finding new products that interest them, but there’s no risk of failing to sell current inventory, forecasting is essentially outsourced to the consumer, and having an engaged audience means valuable feedback is being given consistently. Since its inception in 2012 and success with audiophiles, the self-proclaimed “community-driven commerce” secured over $45M in funding and has expanded to offer products in 20 “communities.”
Whether you’re looking to save on your favorite brands or to take your business online, it’s important to note that the incredible level of accessibility which the web offers has many advantages, but some drawbacks as well. Creative business models based on bulk selling offer deep discounts, but this also means consumers get used to seeing low prices and become reluctant to pay full price, while some corners inevitably get cut to maintain margins.